Egypt Update: Net Oil Importer and Chokepoints

After a post-peak decline production has stabilized but consumption has increased relentlessly at a long-term 1.7% pa, slightly below population growth of around 2% pa. Egypt is now a net oil importer. On these trends, the gap between consumption and production is likely to get larger. This increases imports and the need for fuel subsidies. Let’s zoom into the monthly oil production (crude and NGL separately)

Fig 2: Production of crude oil and natural gas plant liquids

Crude oil production declined again since 2009 at 2.5% pa, offset by an increase in NGLs of 4.7% pa

Fig 3: Net crude exports and refinery utilisation

The crude oil exported up to 2005 (at low oil prices!) is now missing. EIA data are presently only available up to 2012. The EIA writes:

According to data from OPEC’s Annual Statistical Bulletin, Egypt’s refined petroleum output averaged 445,000 b/d in 2013, suggesting that refinery utilization was about 63%. Egypt’s refining output declined by 28% from 2009 to 2013. Facts Global Energy attributes this decline to Egypt’s policy that permits foreign oil producers to export more crude oil as repayment of EGPC’s financial debt. As a result, Egypt’s crude oil exports [56% EU, 28% India, 13% China] have not declined over the past few years, despite declining production. In turn, there is a lower volume of domestic crude oil available for the domestic refineries, and Egypt must make up for the difference by importing petroleum products and/or crude oil. Egypt imported about 145,000 b/d of petroleum products in 2014, according to Global Trade Information Services. Egypt also exported about 60,000 b/d of petroleum products that same year

These straits connect the Gulf of Aqaba and the Red Sea. The Gulf of Aqaba is important for Jordan (port of Aqaba) and Israel (port of Eilat and the Ashkelon pipeline).

The Tiran island belongs to Saudi Arabia but is leased to Egypt which allows a Multinational Force of Observers (MFO) to implement the 1979 Camp David Accord. In this peace treaty Israel was given free passage through the Straits of Tiran and Israel guaranteed free passage to Aqaba.

EAPC’s range of facilities offers the possibility of collecting several cargoes of 600,000 barrels or 1,000,000 barrels at the company’s storage terminals, and then redelivering larger cargoes in Eilat. This flexible system along with other transportation and handling alternatives can produce solutions tailored to the customers’ needs. http://eapc.com/reverse-flow-project/

The Multinational Force of Observers has its South Camp near Sharm-el-Sheikh and an observation post 3-11 on the heavily mined Tiran island itself.

The East coast of Sinai is zone C. Only the MFO and Egyptian police are allowed in this zone.

However, that changed when an insurgency in Sinai started in 2011 (gas pipeline Egypt-Jordan sabotaged repeatedly). Israel allowed Egyptian troops to be positioned in zones B and C. http://english.ahram.org.eg/News/19979.aspx

Aviation Chokepoints

A new type of chokepoint has emerged. After the shooting down of MH17 over Ukraine, the public is aware that certain air corridors are deadly. Sinai is now on the list of areas to be avoided.

2 months before the Russian Metroliner was brought down by a bomb, there was another incident:

That’s clearly in zone C and just where the Strait of Tiran is (due to some coral islands the safe passage is only around 1 km wide). So the stationing of Egyptian military around Sharm el Sheikh had some unintended effects.

We see how oil depletion, attacks on energy infrastructure and problems at chokepoints converge. Egypt is strategically located at the cross roads of North Africa, the Mediterranean, the Middle East and the Indian Ocean. The world better pay more attention to what is happening there.

In the next update on Egypt we’ll have a look at Egypt’s budget deficit.

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